A trade war is a political and economic conflict characterized by extreme protectionism, in which states increase tariffs or other trade barriers against one another in response to perceived threats to their economic interests. They disrupt global supply chains, raise prices for consumers, and can lead to periods of economic stagnation or even conflict. They may result in favorable agreements, but the overall costs typically outweigh any gains.
The trade war between the US and China escalated in 2018, as the Trump administration raised taxes on Chinese goods in retaliation for intellectual property theft and other alleged unfair trading practices, while Beijing increased its own tariffs on American products. Both sides vowed to escalate their efforts until they reached a cease-fire in January 2020 with a “Phase One” deal in which China agreed to purchase more American goods, particularly agricultural products, and addressed some intellectual property concerns. But the truce soon frayed, as the Trump administration expanded an export blacklist to include firms more than 50% owned by those already on it, a move that could cut off access to American technology companies.
The EU faces a more difficult challenge in its negotiations with Washington, because many of its member states have specific interests at stake in the dispute—Germany wants carve-outs for cars and chemicals; France, on its farms; Poland, on its steel producers; Ireland, on its medicines; and the Netherlands, on its chipmakers. The result is a fractious negotiating environment that may make it impossible for any single EU leader to break ranks and support the US position.